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Frisch Demand Functions and Intertemporal Behaviour in Consumption: The Turkish Case

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  • Erdinc Telatar

    (Department of Economics, Hacettepe University, Beytepe, Ankara, Turkey.)

  • Funda Telatar

    (Department of Economics, Gazi University, Besevler, Ankara, Turkey.)

  • Sadiye Turkmen

    (Department of Economics, Hacettepe University, Beytepe, Ankara, Turkey.)

Abstract

This paper examines the intertemporal behaviour in consumption for Turkey which has been experiencing high and chronic inflation since the late 1970s. The Frisch demand system is used to estimate three separate but inextricably intertemporal elasticities: intertemporal price elasticities of demand, commodity-specific intertemporal elasticities, and the intertemporal substitution elasticity of consumption. Our main result is that the Turkish households are reluctant to move their expenditures on non-durable goods from the current period to the next period, regardless of how high nominal interest rates are. This interesting result shows that the consumption behaviour in Turkey has been mainly shaped by uncertainty created by inflationary process and the tendency towards hedging against inflation.

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Bibliographic Info

Article provided by Pakistan Institute of Development Economics in its journal The Pakistan Development Review.

Volume (Year): 39 (2000)
Issue (Month): 3 ()
Pages: 235-246

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Handle: RePEc:pid:journl:v:39:y:2000:i:3:p:235-246

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  1. Muellbauer, John, 1983. "Surprises in the Consumption Function," Economic Journal, Royal Economic Society, vol. 93(369a), pages 34-50, Supplemen.
  2. Anderson, Ronald W, 1979. "Perfect Price Aggregation and Empirical Demand Analysis," Econometrica, Econometric Society, vol. 47(5), pages 1209-30, September.
  3. Hall, Robert E, 1988. "Intertemporal Substitution in Consumption," Journal of Political Economy, University of Chicago Press, vol. 96(2), pages 339-57, April.
  4. Browning, Martin, 1991. "A Simple Nonadditive Preference Structure for Models of Household Behavior over Time," Journal of Political Economy, University of Chicago Press, vol. 99(3), pages 607-37, June.
  5. Browning, Martin & Deaton, Angus & Irish, Margaret, 1985. "A Profitable Approach to Labor Supply and Commodity Demands over the Life-Cycle," Econometrica, Econometric Society, vol. 53(3), pages 503-43, May.
  6. Summers, Lawrence H, 1981. "Capital Taxation and Accumulation in a Life Cycle Growth Model," American Economic Review, American Economic Association, vol. 71(4), pages 533-44, September.
  7. Lawrance, Emily C, 1991. "Poverty and the Rate of Time Preference: Evidence from Panel Data," Journal of Political Economy, University of Chicago Press, vol. 99(1), pages 54-77, February.
  8. Kim, H Youn, 1993. "Frisch Demand Functions and Intertemporal Substitution in Consumption," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 25(3), pages 445-54, August.
  9. Martin J. Browning, 1989. "The Intertemporal Allocation of Expenditure on Non-durables, Services, and Durables," Canadian Journal of Economics, Canadian Economics Association, vol. 22(1), pages 22-36, February.
  10. Mankiw, N. Gregory, 1981. "The permanent income hypothesis and the real interest rate," Economics Letters, Elsevier, vol. 7(4), pages 307-311.
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